Nike’s Q4 revenues up 12 percent

Friday, 29 June 2012

Nike has reported financial results for its fiscal 2012 fourth quarter and full year ended May 31, 2012. Fourth quarter revenues rose 12 percent, or 14 percent on a currency neutral basis, to $6.5 billion, the largest revenue quarter in Nike’s history. This was a result of higher revenues across every Nike brand geography, key category and product type as well as across all Other Businesses. However, diluted EPS for the quarter was down 6 percent as a result of a lower gross margin, higher SG&A spending, an increase in the effective tax rate and a charge related to restructuring Nike’s Western Europe operations to better realign resources against growth opportunities and drive efficiencies.

Gross margin declined 150 basis points to 42.8 percent due primarily to higher product costs. Selling and administrative expenses grew at the same rate as revenue, up 12 percent to $2 billion. Demand creation expenses increased 23 percent to $760 million driven by marketing support for key product launches, the European Football Championships and the Summer Olympics. Operating overhead expenses increased 6 percent to $1.2 billion due to additional investments in the Direct to Consumer and wholesale businesses. Other expenses were $38 million, primarily comprising a $24 million charge related to Nike’s Western Europe restructuring. The remaining $14 million primarily comprises foreign currency exchange losses. The effective tax rate was 26.1 percent compared to 23.2 percent for the same period last year primarily due to year-on-year changes in tax reserves, partially offset by a reduction in the effective tax rate on operations outside the United States. Net income decreased 8 percent to $549 million and diluted earnings per share decreased 6 percent to $1.17, reflecting a 2 percent decline in the number of weighted average diluted common shares outstanding.

Revenues for fiscal 2012 were up 16 percent, or 14 percent excluding the impact of changes in foreign currency, to $24.1 billion. Diluted EPS for the year increased 8 percent to $4.73 as a result of strong revenue growth, leverage of SG&A, and a lower average share count, which more than offset the impact of a lower gross margin and higher effective tax rate.

Nike’s revenues rose 15 percent excluding the impact of changes in foreign currency, driven by growth in all geographies, key categories and product types. Wholesale revenues increased to $17.4 billion, 14 percent higher than the same period last year on a currency neutral basis. Direct to Consumer revenues grew 21 percent to $3.5 billion due to 13 percent growth in same store sales and new door expansion. Revenues for Other Businesses grew 11 percent with no significant impact from changes in currency exchange rates, driven by growth across most businesses.

On May 31, 2012, the company announced its intention to divest the Cole Haan and Umbro businesses, which will allow it to focus its resources on driving growth in the Nike, Jordan, Converse and Hurley brands. For fiscal 2012, Cole Haan and Umbro together contributed $797 million in revenues and a combined loss before interest and taxes of $43 million. This compares to fiscal 2011 combined revenues of $745 million and a loss before interest and taxes of $18 million.

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